How International Finance Really Works

In the public debate over international finance and its operation, an important dimension has been missed. The focus has been on international financial standards and their nature as "soft law". but this discourse ignores profoundly different patterns of legal thought cutting across national boundaries, resulting in different understandings of international financial standards. The experience over the past decade or more, with international financial standards both as diagnostic and prophylactic tools, has been decidedly mixed, and in fact largely unsatisfactory. As well, international financial standards appear strangely remote from the daily grind of international commercial practice, where they are largely unknown. The proposition put forward here is that the formal regulation of financial markets is supported by a body of strong and persistent customary law, a rarely acknowledged but powerful undercurrent in finance, especially in its international iteration. The continued prevalence of oral contracting in the derivatives business and the stubborn persistence of self-regulatory principles are examples. There are several intriguing implications to this proposition